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State seizes Schmidt's Bakery in Loveland for alleged failure to pay taxes

Tax seizure shuts restaurant bakery for third time

By Tom Hacker Reporter-Herald Staff Writer

Posted:
01/09/2013 05:44:01 PM MST

Representatives of the Colorado Department of Revenue posted a "SEIZED" sign and letters listing more than $42,000 in unpaid taxes on the front door of Schmidt's Bakery and Delicatessen in Loveland. The business at 800 SW 14th St. was closed Tuesday. (Craig Young)

Editor's note: This is an update to an earlier Reporter-Herald story.

Tuesday was another red-letter day at Schmidt's Bakery and Delicatessen, the landmark Loveland outlet for authentic German foods and sumptuous bakery treats.

Big red letters: S-E-I-Z-E-D.

For the third time in three years, the Colorado Department of Revenue shut Schmidt's for nonpayment of sales tax and employee withholding taxes, this time in the amount of nearly $50,000.

On Wednesday, owners of the business they bought from founders Harry and Charlotte Schmidt in late 2011 said they were hoping to cut a deal with tax officials that would have it open again soon.

"We knew it was going to be a tough one to resurrect after the Schmidts had it," said Tracy Hilker, who also owns Country Market and two other businesses in Estes Park.

"We gave it our best run. We made a lot of changes. But it's a big ship to turn around, and we didn't quite get it done in time."

'Real Heartbreak'

Hilker said he laments not being able to contact all of Schmidts' 30 employees to notify them of the closure. Some of them were longtime Schmidt's employees, and arrived to find themselves locked out of their workplace once again.

"That's the real heartbreak for us," he said.

Tracy and Deb Hilker led a group of investors who bought Schmidts in September 2011, in the wake of another tax debacle.

The founders' delinquent sales and payroll tax bill led state officials to lock the doors and take the keys in March of that year. Schmidt settled with tax collectors and reopened after a week-long closure.

The state also seized the business for a tax liability in March 2010.

Charlotte Schmidt said she and her husband were shocked to learn Tuesday of the third closure.

'Our Reputation'

"We're sick about it, because it does affect us," she said. "It's still our name, and it's our reputation."

She said her husband, who still works at Schmidt's a few days weekly and greets regulars with the personal charm that helped build the business, had requested a meeting with the Hilkers and their investor partners.

"We would sure like to know what happened," she said. "We knew they were struggling with sales, but I didn't know anything about this. It's a total surprise."

Tracy Hilker said the purchase of the bakery last year was contingent on paying "three or four weeks worth" of unpaid payroll taxes that the Schmidts had accrued in late 2011.

"Part of our problem is that we had to agree to pay a lot of Harry's back taxes," he said. "We also had about $100,000 in repairs, including some that the health department required us to make. A lot of this we knew up front."

Estes Closure

The Hilkers also own and operate Schmidt's Aisle 2 Bakery and Sweet Peaks Cupcakery in Estes Park, a state-posted closure notice was also on the Aisle 2 door on Wednesday.

The two notices on the Schmidt's doors in Loveland listed separately a $42,843 unpaid bill for wage withholding and sales taxes during an unspecified period of time, and another for $4,007 for "delinquent amounts from December 2011 to March 2012."

Hilker said he did not dispute the numbers.

"That could be accurate," he said. "We've been working on actual amounts."

He also said he was painfully aware of the question that customers, employees and just about anyone else might have: Why didn't they just pay their taxes?

'It Was A Blow'

"I know that's what everybody wants to know," he said. "You try to pay your employees, and buy inventory to keep the doors open, and the next phase is paying your taxes.

"It was a blow. We thought we had more time than we actually did. We thought we had more leeway with the payments we were making."

The closure also came as a surprise Wednesday to customer Riki Thompson, who pulled on the locked door before noticing the sign.

Thompson, a medical assistant at the new Banner Health clinic nearby, said she has been walking over to Schmidt's for lunch two or three times a month since her clinic opened in August.

"I'm shocked," she said, adding that Schmidt's recently had expanded its hours and seemed busy. "It was the only place convenient for a quick walk."

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